@deltatrendtrading: I built a script to monitor for—and exploit—arbitrage opportunities between an exotic SPX derivative with a binary-style payoff and standard vanilla options. The exotic paid out $1 if SPX closed within a specific range — and $0 otherwise. I used live order book data from that market and paired it with continuously updated SPX vanilla option quotes. For each exotic contract, I constructed an array of potential hedging positions using condors that approximated the same exposure. When the combined payoff of both markets exceeded $1 across all outcomes, I executed both legs — locking in a small, risk-free edge. No directional bias, just structural mispricing. This particular opportunity has since been resolved — but I believe the exotic market was quoting off an implied distribution similar to what Interactive Brokers derives from their option chain. I’m currently researching how that PDF is constructed and whether it creates systematic pricing differences worth exploring. #quanttrading #arbitrage #optionspricing #exoticoptions #statisticalarbitrage #hedgefunds #spxoptions #ironcondor #algotrading #tradingstrategy #marketstructure #impliedvolatility #pdfimplied #interactivebrokers #financetok #quantfinance

Thomas

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Tuesday 29 April 2025 23:09:01 GMT